Apollo Commercial Real Estate Finance(ARI) - 2025 Q2 - Quarterly Results

Introduction & Disclosures This section provides standard forward-looking statements and disclosures regarding investment performance and the use of the company name Forward Looking Statements and Other Disclosures This section outlines standard forward-looking statements and other disclosures, emphasizing that future investments may not be profitable and past performance is not indicative of future returns. It also clarifies the use of 'Apollo' in the presentation - Investments made in the future are not guaranteed to be profitable or to equal past performance[2] - Past performance is not indicative nor a guarantee of future returns[4] - The presentation contains forward-looking statements regarding financial results and future expectations, which are subject to various risks and uncertainties[3] Q2 2025 Performance Summary This section details Apollo's Q2 2025 financial results, loan portfolio, capitalization, liquidity, and per-share metrics Key Financial Highlights Apollo Commercial Real Estate Finance, Inc. reported Q2 2025 net income of $18 million, or $0.12 per diluted share, and Distributable Earnings of $36 million, or $0.26 per diluted share. The company declared a common stock dividend of $0.25 per share, representing a 10.2% dividend yield Q2 2025 Financial Results | Metric | Value | | :------------------------------------- | :----------------------------------- | | Net income available to common stockholders | $18 million, or $0.12 per diluted share | | Distributable Earnings¹ | $36 million, or $0.26 per diluted share | | Declared common stock dividends | $0.25 per share (10.2% dividend yield) | Loan Portfolio Overview The total loan portfolio reached $8.6 billion in Q2 2025, characterized by a weighted-average unlevered all-in yield of 7.8%. The portfolio primarily consists of first mortgages (98%) and floating-rate loans (96%), with a weighted-average risk rating of 3.0 Q2 2025 Loan Portfolio Snapshot | Metric | Value | | :--------------------------------- | :------------------- | | Total loan portfolio | $8.6 billion | | W/a unlevered all-in yield² | 7.8% | | First mortgages | 98% | | Floating rate | 96% | | W/A risk rating | 3.0 | - Committed $2.0 billion to new loans year-to-date ($1.4 billion funded at close), with $1.4 billion committed in Q2 ($916 million funded at close)[5] - Loan repayments and sales totaled $724 million year-to-date, with $631 million occurring in Q2[5] Capitalization and Liquidity Apollo ended Q2 2025 with a total common equity book value of $1.7 billion and $208 million in total liquidity. The company refinanced its 2026 and 2028 term loans with a new $750 million Term Loan B due June 2030 and expanded its borrowing capacity by $1.4 billion through new and upsized credit facilities Q2 2025 Capitalization & Liquidity | Metric | Value | | :--------------------------------- | :------------------- | | Total common equity book value⁶ | $1.7 billion | | Total liquidity | $208 million | | Cash | $182 million | | Available leverage on secured debt | $26 million | - Refinanced 2026 and 2028 term loans with a new $750 million Term Loan B due June 2030, bearing interest at SOFR + 3.25%[5] - Closed three new secured credit facilities and upsized an existing one, providing an additional $1.4 billion of aggregate borrowing capacity[5] Subsequent Events Subsequent to the quarter end, Apollo received a full repayment of a $250 million first mortgage on a Manhattan retail property. Additionally, a settlement agreement was reached in a Massachusetts lawsuit, resulting in an additional $44 million payment ($18 million attributable to ARI) by August 20, 2025 - Received full repayment of a $250 million first mortgage secured by a retail property in Manhattan, NY[5] - A settlement agreement was reached in a Massachusetts lawsuit, where The Commonwealth agreed to pay Saint Elizabeth, LLC an additional $44 million ($18 million attributable to ARI) by August 20, 2025[5] Per Share Metrics Apollo's Distributable Earnings per share increased to $0.26 in Q2 2025 from $0.25 in Q1 2025, covering the quarterly dividend of $0.25 per share. Book Value Per Share (post-CECL allowance & depreciation) slightly decreased to $12.07 in Q2 2025 from $12.18 in Q1 2025 Distributable Earnings Per Share & Quarterly Dividend | Metric | 1Q'25 | 2Q'25 | | :----------------------------- | :---- | :---- | | Distributable Earnings per Share¹ | $0.25 | $0.26 | | Quarterly Dividend | $0.25 | $0.25 | Book Value Per Share⁶ | Metric | 1Q'25 | 2Q'25 | | :------------------------------------------ | :------ | :------ | | BVPS Post-General CECL Allowance & Depreciation | $12.18 | $12.07 | | General CECL Allowance & Depreciation | $0.48 | $0.52 | - Q2 Dividend per share of $0.25 was covered by Distributable Earnings¹ of $0.26 per share[9] Portfolio Activity and Real Estate Owned (REO) This section reviews Apollo's Q2 and year-to-date portfolio activity, including new funding, repayments, and updates on Real Estate Owned assets Q2 and 1H'25 Portfolio Activity Apollo demonstrated robust portfolio activity in Q2 2025, with $916 million in new funding and $394 million in add-on funding, offset by $631 million in repayments. Year-to-date, new funding reached $1,376 million and add-on funding $467 million, against $724 million in repayments Portfolio Activity (in $mm) | Activity | Q2'25 | 1H'25 | | :----------------- | :---- | :---- | | New Funding | $916 | $1,376 | | Add-on Funding | $394 | $467 | | Repayments | ($631) | ($724) | REO Overview and Update As of June 30, 2025, Apollo's Real Estate Owned (REO) held for investment totaled $821 million in assets, with $444 million in net equity. Significant progress was made on the Brooklyn Multifamily Development, with initial residential TCO received and strong leasing momentum. For 111 West 57th Street, nine units closed, generating approximately $170 million in net sales proceeds, reducing ARI's basis by $141 million REO Held for Investment (as of June 30, 2025, in $mm) | Metric | Assets | Debt (A) | Net Equity | | :-------------------------- | :----- | :------- | :--------- | | Brooklyn Multifamily Development | $821 | ($304) | $289 | | D.C. Hotel | $158 | ($73) | $85 | | Atlanta Hotel | $70 | ($181) | $70 | | Total REO Held for Investment⁷ | $821 | ($377) | $444 | - Brooklyn Multifamily Development received initial residential TCO in June, with final TCO expected in Q4, and strong leasing momentum with move-ins commencing in July 2025[12] - Nine units closed at 111 West 57th Street, generating ~$170 million of net sales proceeds, with ~$141 million reducing ARI's basis after full repayment of third-party senior loan[13] Loan Origination Highlights This section highlights new loan commitments in Q2 and 1H 2025, detailing their characteristics and notable originations Q2 and 1H'25 New Commitments Apollo originated $1.4 billion in new loan commitments in Q2 2025 and $2.0 billion year-to-date. These commitments were 100% first mortgages, predominantly floating rate, with weighted-average unlevered all-in yields of 8.0% (Q2) and 8.1% (1H'25), and weighted-average loan-to-value ratios of 59% (Q2) and 57% (1H'25) Q2 & 1H'25 Loan Origination Highlights | Metric | Q2 | 1H'25 | | :-------------------------- | :------- | :------- | | New Commitments Closed | $1.4 billion | $2.0 billion | | First Mortgages | 100% | 100% | | Weighted Average Unlevered All-in Yield³ | 8.0% | 8.1% | | Weighted Average Loan-to-Value | 59% | 57% | - Notable Q2 originations include a $400 million floating-rate senior loan for a pre-let data center development in the Southwest US and a $186 million floating-rate senior loan for a luxury residential-led mixed-use scheme in the United Kingdom[14][16] Detailed Loan Portfolio Analysis This section provides an in-depth analysis of Apollo's loan portfolio, covering overall characteristics, diversification, and specifics for various property types Overall Portfolio Characteristics Apollo's loan portfolio has a carrying value of $8.6 billion across 53 loans, with 98% being first mortgages and a weighted-average unlevered all-in yield of 7.8%. The portfolio maintains a weighted-average risk rating of 3.0, a loan-to-value of 57%, and a remaining fully-extended term of 2.7 years Loan Portfolio Key Characteristics | Metric | Value | | :------------------------------------ | :------------------- | | Carrying Value / Number of Loans | $8.6 billion / 53 Loans | | W/A Unlevered All-in Yield³ | 7.8% | | Loan Position | 98% First Mortgage | | W/A Portfolio Risk Rating⁹ | 3.0 | | W/A Portfolio Loan-to-Value(b) | 57% | | W/A Remaining Fully-Extended Term⁹ | 2.7 Years | - 41% of the portfolio was originated post-2022, indicating a relatively recent vintage for a significant portion of assets[19] Collateral and Geographic Diversification The loan portfolio is diversified across various collateral types, with residential (25%), office (23%), and hotel (16%) being the largest segments. Geographically, the portfolio has significant exposure to the United Kingdom (36%), New York City (17%), and other European markets (13%) Collateral Diversification (by % of portfolio) | Collateral Type | Percentage | | :---------------- | :--------- | | Residential(d) | 25% | | Office | 23% | | Hotel | 16% | | Retail | 14% | | Industrial | 12% | | Mixed Use | 4% | | Other(c) | 6% | Geographic Diversification (by % of portfolio, in $mm) | Region | Total ($mm) | Percentage | | :------------- | :---------- | :--------- | | United Kingdom | $3,140 | 36% | | New York City | $1,497 | 17% | | Other Europe | $1,158 | 13% | | West | $899 | 10% | | Southeast | $804 | 9% | | Midwest | $560 | 7% | | Other(d) | $605 | 7% | | Total | $8,664 | 100% | Office Loan Portfolio Specifics The office loan portfolio comprises 10 loans with a carrying value of $2.0 billion, all being first mortgages. It has a weighted-average loan-to-value of 51% and a risk rating of 2.7. A significant portion (42%) is located in London, UK, with maturities extending up to 2030 Office Loan Portfolio Key Metrics | Metric | Value | | :-------------------------- | :------------------- | | Number of Loans(a) | 10 Loans | | Carrying Value | $2.0 Billion | | First Mortgage⁹ | 100% | | W/A Loan-to-Value(b) | 51% | | W/A Risk Rating⁹ | 2.7 | - The largest commitment in the office portfolio is $757 million across 3 loans, which are 100% leased to credit tenants[25] Office Loan Portfolio Location Breakdown | Location | Percentage | | :--------------- | :--------- | | London, UK | 42% | | New York City | 24% | | Chicago, IL | 9% | | Various, United States | 9% | | Berlin, Germany | 5% | | Milan, Italy | 4% | | Other | 7% | Senior Loan Portfolio Details The detailed senior loan portfolio, totaling $8.518 billion in amortized cost, is segmented by property type, including residential, office, hotel, retail, industrial, mixed-use, and other categories. It shows varying levels of unfunded commitments and fully-extended maturities across different locations Senior Loan Portfolio Summary (in $mm) | Property Type | Amortized Cost | Unfunded Commitments | | :-------------- | :------------- | :------------------- | | Residential | $1,981 | $32 | | Office | $1,910 | $175 | | Hotel | $1,372 | $12 | | Retail | $1,161 | $166 | | Industrial | $1,001 | $591 | | Mixed Use | $313 | $27 | | Other | $780 | $16 | | Subtotal - First Mortgage | $8,518 | $1,019 | - The portfolio has a weighted-average fully-extended maturity of 2.7 years for first mortgages[31] Residential Senior Loans The residential senior loan portfolio has an amortized cost of $1,981 million with $32 million in unfunded commitments. Loans are diversified across various locations including the UK and US, with maturities ranging from 2025 to 2030 - The largest residential loan (Loan 1) has an amortized cost of $251 million, originated in December 2021, and matures in February 2027, located in various UK properties[27] Office Senior Loans The office senior loan portfolio totals $1,910 million in amortized cost, with $175 million in unfunded commitments. Key loans include a $651 million loan in London, UK, 100% leased by a credit tenant, maturing in December 2028 - Loan 16, secured by an office property in London, UK, has an amortized cost of $651 million and is 100% leased by a credit tenant for a 20-year term, maturing in December 2028[27] Hotel Senior Loans The hotel senior loan portfolio has an amortized cost of $1,372 million and $12 million in unfunded commitments. Loans are spread across Europe and various US locations, with maturities up to 2030 - Loan 24, a hotel loan originated in December 2023, has an amortized cost of $321 million and matures in December 2028, located in various European properties[29] Retail Senior Loans The retail senior loan portfolio amounts to $1,161 million in amortized cost, with $166 million in unfunded commitments. It includes loans in the UK and US, with maturities ranging from 2025 to 2030 - Loan 34, a retail loan originated in April 2022, has an amortized cost of $528 million and $22 million in unfunded commitments, located in various UK properties, maturing in April 2027[29] Industrial Senior Loans The industrial senior loan portfolio has an amortized cost of $1,001 million, with substantial unfunded commitments of $591 million. This segment includes construction loans and is diversified across Sweden, the US, and the UK - Loan 44, an industrial loan originated in May 2025, has $400 million in unfunded commitments and is a construction loan located in Abilene, TX, maturing in June 2030[29] Mixed Use Senior Loans The mixed-use senior loan portfolio has an amortized cost of $313 million and $27 million in unfunded commitments, with properties in London, UK, and Brooklyn, NY, maturing between 2027 and 2029 - Loan 45, a mixed-use loan originated in May 2025, has an amortized cost of $162 million and $10 million in unfunded commitments, located in London, UK, maturing in May 2027[31] Other Senior Loans The 'Other' senior loan category includes pubs, caravan parks, and a portfolio of office, industrial, and retail properties, totaling $780 million in amortized cost with $16 million in unfunded commitments. These loans are primarily located in the UK and Germany - Loan 47, a pubs loan originated in December 2023, has an amortized cost of $226 million and matures in January 2029, located in various UK properties[31] Subordinate Loans and Other Lending Assets Apollo's portfolio includes $146 million in subordinate loans with a weighted-average maturity of 0.3 years, primarily secured by residential properties in Manhattan, NY. Additionally, there is a corporate note classified as 'Other Lending Assets' with a fair value of $40 million and a weighted-average maturity of 4.3 years Subordinate Loan & Other Lending Assets Portfolio (in $mm) | Asset Type | Amortized Cost / Fair Value | Unfunded Commitments | W/A Maturity | | :-------------------------- | :-------------------------- | :------------------- | :----------- | | Subordinate Loans | $146 | - | 0.3 Years | | Other Lending Assets (Corporate Note) | $40 | - | 4.3 Years | | Total Loans, Net | $8,625 | | | - Loan 53, an office subordinate loan, matured in September 2024, with negotiations with the sponsor currently in process[33] Capital Structure and Risk Management This section examines Apollo's capital structure, foreign exchange risk mitigation strategies, and loan maturity and interest rate sensitivities Capital Structure Composition Apollo's capital structure is conservatively managed, with secured debt arrangements constituting 63% ($6,222 million) of total capital. Common equity book value represents 18% ($1,749 million), and the company has no corporate debt maturities until June 2029, having added $1.9 billion in financing capacity during 2025 Capital Structure Composition (in $mm) | Component | Amount ($mm) | Percentage | | :------------------------------------ | :----------- | :--------- | | Secured Debt Arrangements(a),(b),(c) | $6,222 | 63% | | Debt Related to Real Estate Owned | $379 | 4% | | Senior Notes | $1,250 | 13% | | Preferred Stock | $169 | 2% | | Common Equity Book Value(d) | $1,749 | 18% | - Apollo employs a conservative capital management strategy, with 10 secured debt arrangements across 8 counterparties and a ~73% weighted-average available advance rate[36] - The company added $1.9 billion of financing capacity during 2025 and has no corporate debt maturities until June 2029[36] Foreign Exchange Risk Mitigation Apollo actively mitigates foreign exchange risk by structuring secured debt arrangements in local currency and economically hedging net equity and net interest income of foreign loans through forward currency contracts. In Q2 2025, the company realized a $0.6 million gain from forward point impact on currency contracts hedging net equity, despite a $72 million loss on foreign currency forward contracts Foreign Exchange Rate Change (Local/USD) | Currency | % FX Change YoY | % FX Change QoQ | | :------- | :-------------- | :-------------- | | GBP | 6% | 9% | | EUR | 9% | 10% | | SEK | 10% | 12% | - Secured debt arrangements are structured in local currency, reducing FX exposure to net equity on foreign loans, with a 76% weighted average advance on the total foreign loan portfolio[40] Q2 2025 Gain (Loss) on Net Equity & Forward Contracts (in $mm) | Metric | Total | | :------------------------------------ | :---- | | Net Gain on Foreign Loan Principal(e) | $71 | | Q2 gain (loss) on forward contracts(f) | ($72) | Loan Maturities and Interest Rate Sensitivity Apollo's fully-extended loan maturities (net equity) are spread across future years, with $441 million maturing in 2025 and $430 million in 2026. Expected net future fundings are relatively low. The company's net interest income per share shows sensitivity to benchmark rates, particularly SOFR/LIBOR, with a +$0.01 impact for a 0.25% rate change Fully-Extended Loan Maturities and Expected Future Fundings by Net Equity (in $mm) | Year | Fully-Extended Maturities (Net Equity)(a) | Expected Net Future Fundings(a) | | :--------- | :---------------------------------------- | :------------------------------ | | 2025 | $441 | $16 | | 2026 | $430 | $4 | | 2027 | $402 | $20 | | 2028 | $363 | $20 | | 2029 & Beyond | $78 | $0 | Net Interest Income Sensitivity to Benchmark Rates (Per Share) | Index | Change in Benchmark Rate | Net Interest Income Per Share | | :---------- | :----------------------- | :---------------------------- | | SOFR/LIBOR | +0.25% | +$0.01 | | SOFR/LIBOR | -0.75% | -$0.03 | | EURIBOR | All changes | $0.00 | | SONIA | All changes | $0.00 | Appendix This section includes consolidated financial statements and a reconciliation of GAAP net income to distributable earnings Consolidated Balance Sheets As of June 30, 2025, Apollo reported total assets of $9.82 billion, an increase from $8.41 billion at December 31, 2024. This growth was primarily driven by an increase in commercial mortgage loans, net, which rose to $8.48 billion from $6.72 billion. Total liabilities also increased to $7.97 billion from $6.54 billion, mainly due to higher secured debt arrangements Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | Total Assets | $9,816,957 | $8,411,591 | | Commercial mortgage loans, net | $8,479,438 | $6,715,347 | | Total Liabilities | $7,970,571 | $6,537,110 | | Secured debt arrangements, net | $6,213,188 | $4,814,973 | | Total Stockholders' Equity | $1,846,386 | $1,874,481 | Consolidated Statement of Operations For Q2 2025, Apollo's net interest income decreased to $43.07 million from $51.76 million in Q2 2024, leading to a total net revenue of $70.90 million, down from $81.11 million year-over-year. Net income available to common stockholders for Q2 2025 was $17.67 million ($0.12 per diluted share), compared to $32.72 million ($0.23 per diluted share) in Q2 2024. The company reported a significant foreign currency translation gain of $73.71 million in Q2 2025, contrasting with a loss in the prior year, but also a substantial loss on foreign currency forward contracts Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net interest income | $43,070 | $51,758 | | Total net revenue | $70,902 | $81,108 | | Net income (loss) available to common stockholders | $17,671 | $32,717 | | Net income (loss) per diluted share of common stock | $0.12 | $0.23 | | Foreign currency translation gain (loss) | $73,705 | ($1,362) | | Gain (loss) on foreign currency forward contracts | ($82,139) | $6,377 | | Dividend declared per share of common stock | $0.25 | $0.35 | Reconciliation of GAAP Net Income to Distributable Earnings For Q2 2025, Apollo's Distributable Earnings were $36.42 million, or $0.26 per diluted share, derived from GAAP net income available to common stockholders of $17.67 million after various adjustments totaling $18.75 million. This represents an increase from Q1 2025, where Distributable Earnings were $33.24 million ($0.24 per diluted share) Reconciliation of GAAP Net Income to Distributable Earnings (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :------------------------------------------ | :-------------- | :------------- | | Net income (loss) available to common stockholders | $17,671 | $22,923 | | Total adjustments | $18,745 | $10,312 | | Distributable Earnings | $36,416 | $33,235 | | Diluted Distributable Earnings per share of common stock | $0.26 | $0.24 | - Key adjustments include equity-based compensation expense, losses on foreign currency forwards, foreign currency gains, and increases in current expected credit loss allowance[52] Footnotes This section contains supplementary notes and explanations relevant to the financial report